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Do mining companies have the right insurance cover?

Reccomended

As well as using loss planning and scenario testing to foresee potential issues, mining companies need to ensure that they have the right insurance cover and processes in place.

Are you covered?

Large losses can be complicated by issues with insurance, where cover does not respond as anticipated or the claims process does not proceed as expected. “One of the biggest causes of trauma for mining companies is when they face a claim and think they are insured, only to find out that they are not covered,” says Green.

Many mines in Queensland, Australia that were affected by flooding in 2008 and 2010 found that they were uninsured or ended up in litigation with their insurers. One issue was that many did not have policy extensions to cover the cost of removing water from the pit.

Therefore, it is crucial that mining companies work closely with their brokers and insurers to understand exactly what they are – and are not – covered for. And as insurance clauses and wordings can be generic across industries, mining companies need to ensure that their cover reflects their specific risk requirements, says Brennan.

Even with well-trodden causes of loss, such as adverse weather, understanding whether an insurance policy would be triggered is not always straightforward. “We had a claim where a mining site in Australia received heavy rain, but there was very little material damage or business interruption. However, there was a cost for treating water sitting on the site,” says Green.

He adds: “There are many problems that occur that are just not considered at the time of placement. For example, we have seen cyclones hit and wash away tackle and soak stockpiles, which means they then can’t go through feeders.” Some past losses have revealed that indemnity periods were woefully short for large, complex business interruption claims. Other losses have highlighted that some of the costs of dealing with a large claim were not covered by the insurance policy, even though such cover may have been readily available in the market (potentially at little or no extra cost).

Brennan adds that, as the mining industry is constantly changing, with falling commodity prices reducing pressures in some areas of operation, but increasing them in others, it pays to carry out a review every two to five years (or at critical times in the commodity pricing cycle) to make sure that wordings and policy limits are fit for purpose.